One
legacy that Bill Clinton left to small businesses in low-income
neighborhoods is a new Small Business Administration program to
foster business development. The SBA says that the New Markets program
could lead to investment of $15 billion in rural and inner city
areas.

New Markets actually includes two distinct programs:
a venture capital outreach program designed to foster equity investment
in small businesses located in the inner city and economically depressed
rural areas and a grant program to finance third-party programs
to nurture and develop small businesses.

"These new programs will help Americans in the most
economically distressed areas of the country," said SBA Administrator
Aida Alvarez when the programs were announced in January. "It is
a great opportunity for minorities and women and other entrepreneurs
who have not yet shared in our nation's great economy."

But the initiative's long-term survival is not a sure
thing. Although the SBA is moving forward this month with the New
Markets program, President George W. Bush has asked the Office of
Management and Budget to review these and other last moves of the
Clinton White House. Bush's new budget also eliminates future funding
for New Markets and other SBA programs, a move that has raised some
eyebrows on Capitol Hill.

Venture capital for economically
stressed areas The New Markets Venture Capital (NMVC) program is similar
to the SBA-guaranteed loan program, except its arena is venture
capital, not bank loans. The program will provide $150 million in
government guaranteed funds, to be managed and invested in qualifying
small businesses by registered companies, known as NMVC companies.

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It is also similar to the SBA's Small Business Investment
Corporation (SBIC) program, which seeds venture capital firms. The
difference between an SBIC and an NMVC company is the target audience.

NMVC companies are specifically mandated to work with
companies in poor economic areas. The program is designed to "encourage
equity deals in low-income areas where venture capitalists don't
go," says Peter Gibbs, deputy director of the New Markets Venture
Capital Program. In addition, Gibbs says NMVCs will be more patient
investors, requiring a lower return than what large, commercial
VCs usually demand.

The goal of the NMVC program is to give businesses
in economically depressed areas a shot at venture capital. That
will help the companies, but will also help communities improve
their collective economic lot.

"The New Markets Venture Capital program is designed
to make it more attractive to invest in these communities," Administrator
Alvarez said in January. "It will ensure that the opportunity to
stimulate job growth, neighborhood revitalization and economic development
of America's untapped new markets is not lost."

The deadline for companies to apply for NMVC status
is May 21. Under the program, qualified VCs will receive funding
from the program, which they in turn must invest in small companies
in low-income areas.

Private investment -- and
expertise -- also required Although these venture capital companies receive government
backing, each must raise at least $6.5 million in investment capital
on their own. The SBA's goal is to authorize between 10 and 20 NMVC
companies. These specialized VC firms will provide government-guaranteed,
long-term funding. Provided that program adheres to its original
schedule, NMVC companies should begin accepting investment applications
by small businesses starting in October, Gibbs says.

One interesting twist in the NMVC program is a requirement
by the SBA that NMVC companies not only provide equity investments,
but also technical assistance. They must raise funds to provide
at least $1.5 million in technical assistance funding.

Such technical assistance will help small companies
get up to speed with technology and improve their chances of succeeding,
Gibbs notes. "The technical assistance is a major difference between
the New Markets program and traditional venture capital," he says.

New business network The other part of the New Markets initiative announced by
Clinton last January is the BusinessLINC. LINC stands for Learning,
Investment, Networking and Collaboration. The goal of BusinessLINC
is to "strengthen small businesses in distressed communities," says
Marty Gold, BusinessLINC's program manager.

The program will do that by giving funding (grants
and cooperative agreements) to public/private partnerships to work
with and help develop small businesses. "Through BusinessLINC we
are encouraging large businesses and other organizations to work
with and mentor small businesses," Gold says.

For example, an SBA Small Business Development Center
on an Indian reservation and a nearby Chamber of Commerce may apply
for a BuinessLINC grant to establish a mentor program for entrepreneurs
on the reservations. The small companies would be matched to larger,
established businesses in the area to get advice.

BusinessLINC has been funded with $7 million. Companies
wishing to apply for grants had until late March to file, and the
hope is that approved projects will get under way by the end of
the year, Gold says.

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